Do Hedge Funds Love Republic Bancorp, Inc. KY (RBCAA)?

Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.

Republic Bancorp, Inc. KY (NASDAQ:RBCAA) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 4 hedge funds’ portfolios at the end of September. At the end of this article, we will also compare Republic Bancorp, Inc. KY (NASDAQ:RBCAA) to other stocks, including Argan, Inc. (NYSE:AGX), Harmonic Inc (NASDAQ:HLIT), and GasLog Partners LP (NYSE:GLOP) to get a better sense of its popularity.

To most investors, hedge funds are assumed to be worthless, old investment vehicles of the past. While there are more than 8000 funds trading at present, We choose to focus on the upper echelon of this club, approximately 700 funds. These hedge fund managers shepherd most of the smart money’s total capital, and by keeping track of their first-class stock picks, Insider Monkey has discovered a few investment strategies that have historically outrun the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outpaced the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, let’s take a look at the fresh action regarding Republic Bancorp, Inc. KY (NASDAQ:RBCAA).

What have hedge funds been doing with Republic Bancorp, Inc. KY (NASDAQ:RBCAA)?

At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey held long positions in this stock, flat over the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Stadium Capital Management, managed by Alexander Medina Seaver, holds the biggest position in Republic Bancorp, Inc. KY (NASDAQ:RBCAA). Stadium Capital Management has an $8.2 million position in the stock, comprising 3% of its 13F portfolio. Sitting at the No. 2 spot is Nantahala Capital Management, managed by Wilmot B. Harkey and Daniel Mack, which holds a $6.7 million position; 0.9% of its 13F portfolio is allocated to the company. Remaining professional money managers that hold long positions consist of Renaissance Technologies, Israel Englander’s Millennium Management.

We view hedge fund selling in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Basswood Capital. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case here because only one of the 700+ hedge funds tracked by Insider Monkey identified as a viable investment and initiated a position in the stock (that fund was Millennium Management).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Republic Bancorp, Inc. KY (NASDAQ:RBCAA) but similarly valued. These stocks are Argan, Inc. (NYSE:AGX), Harmonic Inc (NASDAQ:HLIT), GasLog Partners LP (NYSE:GLOP), and Natural Grocers by Vitamin Cottage Inc (NYSE:NGVC). All of these stocks’ market caps match Republic Bancorp, Inc. KY (NASDAQ:RBCAA)’s market cap.

As you can see, these stocks had an average of 10 hedge funds with bullish positions and the average amount invested in these stocks was $39 million. That figure was $16 million in Republic Bancorp, Inc. KY (NASDAQ:RBCAA)’s case. Argan, Inc. (NYSEAMEX:AGX) is the most popular stock in this table. On the other hand, GasLog Partners LP (NYSE:GLOP) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Republic Bancorp, Inc. KY (NASDAQ:RBCAA) is even less popular than GasLog Partners LP (NYSE:GLOP). Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case, more research is warranted.